The home equity cash machine has still been a big prop for the economy this year. That won’t last

Calculated Risk has gotten the latest numbers from Fed economist James Kennedy on net equity extraction (the spending money that Americans pulled out of mortgage refinancings and home equity loans) in the third quarter of this year. It was $133 billion, or 5.2% of disposable personal income. Which is way down from 2004-2006, but still a lot. Here’s the chart, again from Calculated Risk:

With house prices (a.k.a. home equity) declining and banks raising lending standards, it seems like that number ought to head back down to somewhere near zero in the next year or three. And I don’t really see how that happens without a seriously sharp (a.k.a. recessionary) downturn in consumer spending. Not that I’m an economic forecaster or anything.